Is there a maximum legal limit that a bank can charge in overdraft fees in the U.S.?
For example, I was under the impression that a bank had to have some proportion of the fee related to the amount overdrafted. If you overdraft $5, it would be illegal to charge a $10,000 overdraft fee. Is this correct?
Banks are chartered either by the federal government or by their state government, so there are 51 possible answers to this question. Probably more, since there are different types of banks. And credit unions have their own organizations and rules.
You’re going to need to be more specific, I guess.
Sorry for getting back to this so late. I’m asking for a friend and was unable to determine his location. He is in California, a standard bank not a credit union.
My understanding is this, while there may be a maximum APR by law, I don’t think overdraft fees fall under that classification. The fee isn’t assessed over a period of time, as interest typically is. It’s a one time fee whether or not you overdraft exists for 1 or 10 days. Each transaction that causes an overdraft or causes the account to go into further overdraft would trigger a fee. The APR calculation therefore doesnt’ seem pertinent.
As far as proportion, if I bounce a check worth $1.00, I am going to get charged $30, which would be the same fee if I bounced a $2,000 check. The difference is the bank would probably press charges over the bigger check unless I had a REALLY good excuse.
As far as I know, though, once they nail me the $30.00 for the bounced check, they wouldn’t continue to slam me with fees. But then this is City National I’m talking about, and they hate their customers so maybe they’d find a way to get more money out of me.
The fee isn’t assessed over a period of time, as interest typically is. It’s a one time fee whether or not you overdraft exists for 1 or 10 days. Each transaction that causes an overdraft or causes the account to go into further overdraft would trigger a fee.
Right. Although if you kept bouncing checks over and over, they’d probably freeze your account.
The fun part is when the bank fiddles with your account and MAKES you bounce a check. I had a paycheck bounce this winter, and did they go after the person who wrote the bad check? No. They went into my account, yanked out the amount of my paycheck without my knowledge (which had already been credited to my account), which in turn caused me to bounce 7 … yes, 7 checks. Yes, that’s $150 in overdraft fees. They reduced it to $90, but still. In the end I paid my entire paycheck to the bank, and then some.
Little consumer tidbit here:
About half the time, a call to a customer service rep with an excuse, any excuse, as to why bouncing the check wasn’t your fault, combined with an assertion that you’ll have a hard time justifying keeping an account open with them due to the service fee they just assessed will result in the service fees being either waived or reduced.
I’ve had this work with large credit unions and large commercial banks. I’m sure some places it won’t work, but it’s worth a shot the first time.
When you open an account with a bank, they give you a schedule of fees which tells you exactly how much they’ll charge you for bouncing a check. If they want to change the fees, they have to mail you a notice with the new fees and the date they’ll take effect. I’ve never seen an overdraft fee that depended on the amount of the check.
One time, I deposited a reasonably large check ($1k range) in my savings account. It bounced, and for some reason the bank left the savings account balance alone but reduced my checking account balance by the amount of the check. This of course resulted in some checks I had written with funds I knew were good bouncing all over town. The bank was extremely unhelpful when I asked them for an explanation and for reversal of all the bounced check fees that they were now charging me, since it was there error that caused all the bounced checks. After about a dozen letters and hours on the phone they finally refunded most of the fees, but still sent me a nastygram that implied it was all my fault for depositing a bad check. I moved all my money to another bank and reported them to the state banking commission. For about two years, they kept on sending me junk mail and calling me trying to get me to come back.
One of my bank accounts was with Charter One. I was down to like $27, and I was thinking about closing it (I had gotten the free gift that I wanted, plus the $100 just for openning). I hadn’t used it in 30 days, and I was thinking about closing it. Since, I don’t have a lot of time to spare during banking hours, I put it off. I did, after 3 more days, to take out 20 bucks. 10 days later, I get a call saying that I have an extended over draft. I check my bank account, and on the day that I withdrew $20, I was charged an account fee of $30 (I had 30 days ago taken away my direct deposit (from an annuity), so maybe that’s why). Now, I was in the negative, which caused a $30 overdraft fee. Since I rarely check the account, they added another $30 fee for the “extended overdraft.” I don’t have a list of fees handy, and I’m so upset at the bank right now, that I refuse to even patronize their web site, so I can’t tell you how long they would have charged me. After calling my branch and being rudely told “if you’re not going to use the account, why open it?” I then called customer service, and they reversed all the charges. I then went to another local branch and they closed it out. I did not get an answer from either over the phone or at my local branch as to what happens should I go out of town for like a month and they can’t get a hold of me and I’m not using my account. Apparently, according to their logic, they would keep dinging my acct for $30.